Phillip Hammond, British Chancellor of the Exchequer, has suggested blockchain technology can be used to keep frictionless trade across the Irish border once Britain leaves the EU.
“There is technology becoming available (…) I don’t claim to be an expert on it but the most obvious technology is blockchain,” Hammond said during the on-going conservative conference where Brexit dominates.
With days now left to go until an historic summit and just weeks until Britain leaves the EU this March, the Irish border has risen as a difficult problem to solve.
One suggestion, which is unacceptable to Britain, is for Northern Ireland to continue operating within EU’s jurisdiction. Another suggestion, which no one wants, is putting checkpoints and a hard border.
Some within the conservative party have suggested customs can be managed away from the border, while the Prime Minister and supporters of a soft Brexit have come up with a complex arrangement whereby Britain sort of manages EU customs for goods that enter Britain and make their way to the EU.
That, of course, requires trust from the European Union that Britain will be able to appropriately manage this matter of money as tariffs may be applied at different rates and there may be rebates.
The Brexit whitepaper itself hinted at the use of blockchain tech, but now the Chancellor is making it explicit, passing the bucket to EU to respond.
The EU will have to consider two arguments. One against, given by the FT which basically descends into name-calling, and one argument we’ll briefly give in these pages.
The idea is worth considering in our view and the main reason is because blockchain tech has found a use case as a co-ordinating platform where different parties can enter information which is then automatically shared by others and is unchangeable by others.
Just how workable this solution would be depends on how it is designed. Generally, the more distributed the shared ledger, the more trusted as it becomes more and more difficult to change as more and more nodes or copies of the ledger are replicated.
The issue in question concerns the movements of goods in and out of the country. These are public matters, so even a public blockchain, like ethereum, can be utilized.
One recent example where an ethereum based platform is being used was announced just recently. At a high level, it works as follows:
“Once instructions from the bank’s client are received, the bank creates a smart contract where the terms are laid. The ship owner then enters the information regarding the loading of the copper on the blockchain.
An inspector then checks the quality and gives the green-light or otherwise on the blockchain. The insurance company then confirms the goods are insured [on the blockchain].
If all is fine and all are satisfied, the tittle to the goods then moves from the seller to the buyer, with blockchain tech basically turning the paper letter of credit or bill of lading or any document into an immutable digital form.”
In other words, the blockchain here is just an open platform where everyone (or just EU and British authorities if so designed) can see what everyone else is stating, with inspectors checking for quality and so on.
FT of course is right to say that the blockchain “can’t poke its nose inside a lorry,” but it can allow everyone to co-ordinate in a way that makes information unchangable if it is so designed.
It therefore could work for the limited use case of co-ordination and for ensuring that shared data isn’t manipulated after it is shared. That can be coupled with plate recognition and so on, as well as penalties or even criminal offenses for lying, with some of the monetary aspects, like tariffs or rebates, potentially automated after British or EU authorities finalize the checks.